Suffolk Ltd: How county’s leading firms are defying the economic gloom

SUFFOLK’S biggest businesses have continued to grow and invest over the past year despite the continuation of harsh trading conditions and uncertainty over the outlook for the UK, European and global economies, according to a survey published today.

The annual Suffolk Ltd report, compiled by accountants and business advisers Grant Thornton, shows that the combined turnover of the 100 largest companies based in the county has increased by 5.2% over the past year, from �4.05billion to �4.26bn.

And their combined operating profit has surged by 41% compared with the 2011 Suffolk Ltd report, from �147million to �207m.

This figure was skewed by the contribution from Newmarket-based horse breeder Juddmonte, which accounted for around half of the increase in operating profit as a result of a highly successful year for sales but, even stripping this out from the overall figure, operating profits were still 20% ahead.

Only five companies within the top 100 posted operating losses, compared with 12 the previous year, with the combined operating profit margin coming in at 4.9%.

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James Brown, practice leader at the Ipswich office of Grant Thornton, said: “Despite the challenging trading conditions, Suffolk Ltd is coping very well.

“It’s particularly encouraging to see a healthy increase in turnover which has been translated into a significant rise in operating profit, signalling growth in activity and demonstrating the resilience of Suffolk’s businesses.”

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He added: “These figures are telling me that, having cut their costs over the past two years in order to be nible, companies are now in good shape so that growth in sales has dropped through to the bottom line. They are not just buying volume for the sake of covering their overheads.”

The interest cover ratio, a measure of the ability of profits to cover interest payments, increased from 3.9% to 5.7%, while gearing, measuring the the extent to which a company is funded by debt, remained steady at around 52%.

The balance sheet for Suffolk Ltd indicates that the county’s leading businesses remain willing to invest in capital assets, which were up 6.4% compared with 2011 after taking into account depreciation.

Net current assets also increased, by 12.6% to �657m, reflecting a stronger balance sheet position for many companies compared with 2011 and, says Mr Brown, showing that “we are living nicely within our means”.

One source of concern, however, is that debtor days, a measure of the average time taken to convert credit sales into cash, lengthened slightly, from 40 days to 42. “Cash is still king, and we would not want to see this figure drift out any further,” said Mr Brown.

The workforce employed by the Suffolk Ltd companies remained broadly flat, at 27,332 against 27,477 last year, although this conceals considerable volatility, with redundancies at a number of firms being largely off-set by increases elsewhere, mainly due to acquisitions or reduced use of sub-contractors.

The Suffolk Ltd firms employ just over 10% of the county’s total workforce, with an average of 273 staff per company. the average wage across the companies increased by 3%, marginally below inflation for the period, to �22,226, slightly ahead of the Office for National Statistics’ latest annual survey which shows an average for Suffolk of �21,878.

Broken down by sector, the biggest changes were in Retail & Wholesale distribution, with a fall of 588 (mainly due to companies dropping out of the top 100), and Transport & Motor Retail, where the headcount grew by 544 (largely as a result of an acquisition and taking sub-contract work in-house).

Four of the six sectors into which the Suffolk Ltd companies are divided in the report showed an increase in turnover.

Transport & Motor Retail led the way with growth of 15.7%, including some acquisitions but largely driven by organic growth. This was enough to take the sector back into top spot in the survey, accounting for 26.7% of the total.

Food & Agriculture also overtook last year’s leader, Retail & Wholesale Distribution, with growth in turnover of 8.3%, taking its share of the total to 24.7%.

Growth was also recorded in Property & Construction, where growth of 6.9% took its share of the total to 8.4%, and Manufacturing, where turnover grew by 4.2% to account for 6.0% of the total.

Retail & Wholesale Distribution, which saw sales dip by 1.7%, fell to third place overall with a share of 24.3%, but the biggest fall in sales was suffered by Services, with an 8.9% fall cutting its share of the total to 9.9%.

All sectors, however, saw their operating profits increase year-on-year. Food & Agriculture delivered the biggest operating profit of �49m, up from �43m, closely followed by Transport & Motor Retail and Retail and Wholesale Distribution, both on �47m.

Juddmonte’s strong year saw operating profits within the Services sector leap from �6m to �45m, by far the largest percentage increase of any sector, although the total for services would still have been �8m without this.

Manufacturing’s profits grew from �6m to �11m while within Property and Construction the total increased from �7m to �9m.

The full 2012 Suffolk Ltd report is being launched today at a breakfast-time event at Trinity Park, Ipswich, where the guest speakers are due to be Alan Ridealgh, managing director of Stowmarket-based malt and malted ingredients company Muntons plc, and futurologist David Smith, chief executive of Global Futures and Foresight.

Speaking ahead of the event, Mr Smith said: “First we learn to survive, and we go on doing the things necessary to survive, then we innovate.

“Innovation can be new processes, new plant, new partners or new products and services. It appears that Suffolk Ltd is prepared to invest in its future now.”

Mr Brown added: “Suffolk Ltd has continued to show is resilience in weathering the on-going challenging trading conditions that its constituent companies have experienced, whether their markets are local, national or international.

“Should market conditions start to improve during 2013 and beyond, Suffolk Ltd looks to be in good shape to respond and fully exploit any rebound in fortunes.

“Certainly, increased investment by Suffolk Ltd companies provides encouraging signs that companies are optimistic about the future and preparing themselves for growth which is hopefully now close on the horizon.”

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